State of the State: Pennsylvania

Posted on March 14, 2017
by Justin Leventhal & Joel Griffith

In his State of the State address, Pennsylvania Governor Tom Wolf called for spending cuts totaling $2 billion rather than tax hikes to remedy the state’s structural deficit. He also discussed education spending and budgetary reform.

To reduce overhead, the governor proposed consolidating human resources departments, information technology departments and the dazzling number of state pension funds. Additional fiscal savings include selling off unused state-owned lands, allowing vacant positions in Pennsylvania’s bureaucracy to go unfilled and offering early retirement options to some civil servants.

On tax policy, the governor also seeks to close loopholes in the corporate income tax code. This will diminish the cronyism infecting the current law. However, this fails to tackle one of the heaviest drags on the Pennsylvania economy—one of the highest top marginal corporate income tax rates in the nation. The suffocating tax environment created by this 9.99 percent tax rate—and a combined state and local rate of 17.01 percent—contributes immensely to the Keystone State’s dismal 39th economic outlook ranking in the annual ALEC publication Rich States, Poor States.

Turning to education, the governor called for reversing previously enacted spending cuts, labeling these cuts “short-sighted.” The proposed $125 million on K-12 education, $75 million on early childhood education and $8.9 million on the state’s higher education system may be welcomed news to many. But according to the latest available data (2014) from the Census Bureau, Pennsylvania already spends more per pupil for elementary and secondary reduction than 40 other states, or more than 126 percent of the national average. The annual ALEC publication Report Card on American Education gives the state’s educational policy a “C” and a rank of 17th nationally. Rather than follow the governor’s focus on a perceived funding shortfall, state legislators should consider reforming policies on teacher quality and expanding school choice programs. After all, as the report card for Pennsylvania indicates, National Assessment of Educational Progress (NAEP) scores declined in several measures recently even as per pupil spending increased.

Enacting common sense budgetary reforms, eliminating some cronyism and blocking attempts to increase taxes yet further are commendable. But this will not reverse Pennsylvania’s economic malaise. Accomplishing this will require bold reduction in twin burdens of bureaucracy and tax burden.

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